Chuka Umunna
Main Page: Chuka Umunna (Liberal Democrat - Streatham)Growth and Infrastructure Bill
Chuka Umunna Excerpts
Michael Fallon
I am grateful to my hon. Friend. We have never specified the type of company that is most likely to take up this new status, but obviously younger companies at the beginning of their lives will be able to use this status at a time when they might not be able to pay their staff more than competitor companies, or those already established in the marketplace. They will therefore have an extra edge to offer to those individuals whom they wish to recruit. We have had much interest already from such companies, who see the new status as an exciting way to motivate their new work forces.
Protections for people do not end there. The Bill confirms that someone can be an employee shareholder only if they are given at least £2,000 worth of shares, and if they are not the person will not be an employee shareholder and will have all the normal employment rights that are associated with employees.
Clause 27 also stipulates that a person can be an employee shareholder only if they receive fully paid up shares. This means that the employee shareholder will not be liable for any debts should the company fold. Of course there will be circumstances where an employee shareholder leaves the business. It should be apparent from all that I have said that it is not the Government’s intention that employee shareholders are left with shares that they can sell back to the company only at prices that are unfair or where the buy-back arrangement would leave the employee shareholder at a financial disadvantage if there is no other way of disposing of the shares for value.
On Report in this House, we introduced an amendment to make a power to allow the Government to set a minimum value for the buy-back of shares if the company and employee shareholder enter into a buy-back agreement. That reserve power will be used, if it is needed, to safeguard employee shareholders in the unlikely event that employers behave unscrupulously. By including these protections we are ensuring that individuals understand the implications of employee status and are genuinely free to decide whether to accept it. No one can be pressurised, bullied or coerced into accepting this new status.
With this announcement of further explicit protection for jobseeker’s allowance claimants, I urge hon. Members to disagree with the other place and reinsert clause 27 into the Bill. The new employment status gives young companies in particular a new option that they can use to attract high-calibre individuals to help grow their business. It is important that we give companies that choice, but it is also important that we give people this opportunity to share in the growth potential of the company they work for. The clause should be part of the Bill.
Mr Chuka Umunna (Streatham) (Lab)
The Opposition agree with Lords amendment 25, which seeks to remove the part of the Bill that provides for the new status to which the Minister referred.
Let me start by making an observation. We are debating the Bill the day before many in the country will pause to observe the funeral of the late Baroness Thatcher. Coincidentally, in supporting the Lords amendment to dump the Government’s proposal, we find ourselves in the extraordinary position of being on the same side of the fence as at least four of her former Ministers: Lord Lawson, Lord Forsyth, Lord Deben and Lord King. The reason for this unusual state of affairs is simple. Notwithstanding the admittedly notable concession that the Minister has just given, this is an ill-thought-out and bad idea, and that is why there is strong cross-party opposition. Lord Forsyth put it well in the Lords when he said that the proposal
“has all the trappings of something that was thought up by someone in the bath”.—[Official Report, House of Lords, 20 March 2013; Vol. 744, c. 614.]
I have to say that I agree with Lord Forsyth on another matter, too. I cannot understand why my opposite number, the Secretary of State for Business, Innovation and Skills, the right hon. Member for Twickenham (Vince Cable), who I note is not here today, is going along with this. The Business Secretary engaged in some considerable media in respect of the Beecroft proposals, and said how outrageous they would be. I am, of course, aware that the Minister perhaps has a different view. As Lord Forsyth said, at least Beecroft did not take away entitlement to redundancy payments. This is worse than Beecroft because it does.
There are a number of reasons why we support the Lords amendment. They were all mentioned in the other place and we wholeheartedly agree with them. First, this is supposed to be a “growth” Bill. No evidence whatever appears to have been adduced by the Government to show how this measure would boost growth. The attitude of businesses, at its most generous, is divided; at its worst, it is overwhelmingly opposed to the measure. In the latest published survey of 700 companies by Barclays Corporate, which was published this week, the proposal appears to find favour with just 25% of respondents. In the Government’s own consultation, only five businesses out of the 200 responses received showed any interest in taking up the scheme.
Secondly, why connect employee ownership, for which there is widespread support in all parts of the House, with giving up rights to not be unfairly dismissed, redundancy pay, flexible working and time off for training? No coherent answer has been provided by the Government during the Bill’s passage through this House or the House of Lords. In fact, as the Conservative Baroness, Lady Wheatcroft, said, their proposal simply risks giving employee ownership a bad name. After all, if businesses with employee shareholders are looking to carry out a redundancy programme, who are they likely to let go first?
Nick de Bois (Enfield North) (Con)
The hon. Gentleman gives me a choice of things to argue about, but I will pick up on just one—the survey. He refers to 25% of companies supporting the measure. He is overlooking the fact that it is designed to attract small and medium-sized enterprises—niche companies. It will never enjoy full use by 100% of companies. We should focus on the small businesses that will take advantage of it and become tomorrow’s medium and large enterprises.
Mr Umunna
With the greatest respect to the hon. Gentleman, my understanding is that the survey was conducted among the very businesses to which he refers. As far as I am aware, the Government have not claimed that it is specifically for small businesses. I am happy to be disabused if I have got that wrong.
Thirdly, the proposal could do immense damage to workplace relations and to the standing of business more generally. I say that from a common sense point of view and as an employment lawyer. What on earth are employees to think if suddenly, out of nowhere, their employer says, “Will you give up all your fundamental rights in this workplace if I give you some shares?” What signal will that send to the employee? [Interruption.] The hon. Member for Skipton and Ripon (Julian Smith) says from a sedentary position that it is voluntary, but what does that say about one’s relationship with an employer if they are talking about taking away fundamental rights at work? As Justin King, CEO of Sainsbury’s and until recently a member of the Prime Minister’s business advisory group, said, what will the population at large think of businesses that want to trade employment rights for money?
Fourthly, and this applies more generally to the Government’s moves to destroy the unfair dismissal regime, removing people’s rights to claim unfair dismissal, or a redundancy payment for which compensation is capped will simply increase the likelihood of employers facing spurious discrimination claims brought against them, for which compensation is unlimited. That was a point made by Baroness Brinton in the other place.
If an employee is to be offered this special type of employment status, it is important that they should be able to access proper advice on it, particularly in this climate when jobs are few and far between. That point was made by the noble and learned Lord Pannick, who proposed the amendment. The Government have refused to accept that statutory rights should be lost only if the agreement is in writing and the person concerned has received proper independent legal advice on its consequences. That is how it applies in relation to compromise agreements.
Then there is the issue of the shares themselves and tax. How on earth are these to be valued, particularly given—if the hon. Member for Enfield North (Nick de Bois) is right that the measure is aimed at small companies—that many are unquoted. How will the value of shares be determined without incurring exorbitant fees that would render the whole exercise worthless? According to the Treasury, it will cost the Exchequer £l billion by the end of the forecast period, but the true cost may well be more because, as the Treasury’s December 2012 policy costing document says, it is hard to predict how quickly the increased scope for tax planning will be exploited. That point was picked up by Paul Johnson, the director of the Institute for Fiscal Studies, who said that
“just as government ministers are falling over themselves to condemn”
tax avoidance
“that same government is trumpeting a new tax policy that looks like it will foster a whole new avoidance industry.”
Andy Sawford (Corby) (Lab/Co-op)
My hon. Friend is absolutely right to raise the issue of tax avoidance. Is there not also an implication for lower paid workers? The Minister has just told us that only the first £2,000 of shares will be exempt from PAYE and national insurance. Does that not mean that workers with, say, £4,000-worth of shares will be hit with a tax bill?
Mr Umunna
That is absolutely right.
My final and principal objection to the proposal is this: last November, I put it to the Business Secretary in this House that an employer in his Twickenham constituency would, under these arrangements, be able to make acceptance of job offers conditional on people agreeing to accept employee owner status. He denied that that was the case, yet patently the arrangements allow for it. The risk in the current jobs market of people being pressurised, or feeling under pressure, to take jobs with this type of status will be increased.
I am pleased about the Minister’s concession today. I raised the point with him on Report, but did not get the kind of assurance or concession that he just gave, and it is good that he gave it. Lord Forsyth said he was astonished that the coalition was even thinking of bringing forward a measure under which people could have their right to jobseeker’s allowance withdrawn if they did not accept a job on this basis. Of course, we will need to study the guidance. We have not seen it yet, and the first we heard of the concession was from the Minister just now. Notwithstanding the concession, however, and for all the reasons I have just given, we continue to support Lords amendment 25.
Nick de Bois
I am grateful for the opportunity to highlight a couple of points in favour of the Government’s measures. Judging from the comments of the hon. Member for Streatham (Mr Umunna), obviously the Opposition see this fundamentally as an attack on rights, whereas I see it as a chance to empower individuals and workers to become owners and shareholders and to move from employment to entrepreneurialism, which should be encouraged, not fraught with fear.
Nick de Bois
I agree. The point I am trying to make, in as balanced and fair a way as I can under the circumstances, is that, like many people, when I started a business I did not worry about employment rights and legislation. I tackled it with enthusiasm; I went for it. When I did that, however, in the late ’80s, I did not have to think about the issues that are now facing many people and which are now at the forefront of their minds. That is why I welcome the proposal.
I want to stick to my main premise, in response to the comments from the hon. Member for Streatham. I do not believe that anyone will lightly give up shares in a business. It is not something that employers do. They give shares up only in return for value, and they get that value from people or by selling them. It is perfectly reasonable to assume that employers will look for value from what they give up. As he will know with his background, however, we also have to bear it in mind that by transferring shares, employers also transfer rights—in contrast to what he said about employment rights—under the Companies Act 2006, which was introduced by the last Government, which enhanced the rights of minority shareholders, such as on matters of prejudice. Employees can even form quasi-partnerships through small minority shareholding. Employers do not lightly give up shares, and when they do, they actually give rights to individuals.
Nick de Bois
If the hon. Gentleman wants to intervene, I would be happy to take up his point.
Mr Umunna
I do not disagree with many of the hon. Gentleman’s points, but I still fail to understand—he will have to forgive me—why, despite what he says, we need to link giving up shares and allowing employees to participate in the way he describes with taking away their fundamental rights at work.
Nick de Bois
I hope that the hon. Gentleman will understand, as I am sure he does, that the best chance of success for a micro niche business—the people who will benefit from this measure and become tomorrow’s medium businesses—is to be in the most flexible market possible. The supply side has to be flexible, so that employers can afford to take the risk.
These very modest removals being offered to individuals—they will not be compelled to take them—will be attractive to entrepreneurial, non-risk-averse employees as well as to small, flexible business leaders wanting to start a business.